Understanding Appraisals

Buying a house can be the largest financial decision most people will ever encounter. Whether it's a main residence, a seasonal vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to see it through.

The majority of the people involved are quite familiar. The real estate agent is the most recognizable person in the transaction. Then, the bank provides the financial capital necessary to fund the deal. And ensuring all details of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party is responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from A Quality Appraisal, LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at A Quality Appraisal, LLC is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

After the inspection, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we pull information on local construction costs, labor rates and other elements to determine how much it would cost to build a property nearly identical to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

For example, if the comparable property has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
However, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Erie and Weld, A Quality Appraisal, LLC can't be beat. This approach to value is typically awarded the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this case, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from A Quality Appraisal, LLC will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.